At the suggestion of Mr. Gary Aguirre, I describe below the circumstances of mydischarge by the Congressional Budget Office and request your assistance to the extent youbelieve there is something appropriate you could do on my behalf.

As the Congress grapples with the economic and budgetary challenges facing the nation,the Congress relies on the Congressional Budget Office (CBO) to provide “objective” and “nonpartisan”analyses to inform its policy decisions.l This mandate gives the CBO a unique statusand confers upon the agency an impression of credibility and authority, as its analyses can alterthe course of national policies. The CBO cultivates this image internally and externally, andenjoys the protection ofthe press.

Yet, my brief time as a senior staffer financial economist at the CBO suggests that thereis room for doubt about this perception of an objective and non-partisan CBO. Alternative viewpoints are suppressed or questioned as “pessimistic” by CBO Director Doug Elmendorf.Economic facts inconvenient to the CBO’s forecasts of economic growth, recovery and otherestimates are omitted or suppressed so the desired message may be delivered. For providingtruthful and correct analyses of the issues, I was abruptly fired after 2.5 months at the CBO.

Suppression of Alternative Views

In October 2010,I wrote about the conditions and developments in the banking sectorand mortgage markets. The events surrounding the collapse of the housing market triggered whatmany consider to be the worst economic and financial crisis in 80 years since the GreatDepression. The effects from this market with $10 trillion in residential mortgage debtoutstanding exposed systemic risks and put into question the solvency of financial institutionsworldwide. In addition to the global response, the U.S. government and Federal Reserve haveresponded with trillions of dollars in extraordinary fiscal and monetary stimulus, the bulk ofwhich was aimed at shoring up the banks and financial institutions.

I was repeatedly pressured by the CBO Assistant Director, Deborah Lucas, in charge ofthe Financial Analysis Division to not write nor discuss issues in the banking sector andmortgage markets that might suggest weakness in these sectors and their consequences on theeconomy and households. Assistant Director Deborah Lucas explicitly sought assurances fromthe Assistant Director in charge of the Macroeconomic Analysis Division that the issues I raisedwould not lower the CBO’s forecasts of economic growth. More broadly, what emerges is apattern of suppression by the CBO to prevent public writings about the damage brought on bythe banking and financial sector and housing collapse. While disregardingfactual and empiricalevidence, the CBO leadership insisted:

o Statements could not be made attributing the decline in property tax revenues toforeclosures and the decline in home prices, which runs counter to common sense andthe findings by the U.S. Senate Joint Economic Committee of the U.S. Congress.

o Foreclosures had no impact on home prices (negative extemalities, spillover effects).This runs counter to common sense, and a prominent national home price index byCorelogic in the CBO’s key database subscription showing clearly the distressedhomes component of the index worsens home price declines.

o The decline in home prices had no impact on household wealth, which runs counterto common sense and the fact that the home is a significant asset or source of ‘wealth’for most households. According to the Federal Reserve, about $7 trillion in homeequity evaporated in the housing collapse.

o The emerging foreclosure fraud problems in September 2010 were due to media“sensationalism”, “the kind of event of the moment where we should be addingskepticism, not just repeating the hype in the press” and discussingit “laclcs judgmentabout what is important’.

Let’s take a closer look at the implications of the unknown risks and liabilities of theforeclosure fraud problems unfolding through the legal process, which led the nation’s largestbanks to suspend foreclosures nationwide. Issues at the heart of the foreclosure problems pertainto securitization (pooling of mortgages that collateralize mortgage-backed securities “MBS”) andthe Mortgage Electronic Registration System (MERS), which purports to have legal standing onelectronic records of ownership on about 65 million or half of all mortgages in the country.

MERS, with Fannie Mae and Bank of America as founding members, facilitated WallStreet’s ability to expedite the pooling of subprime mortgages into MBSs by bypassing standardownership transfer procedures as the housing bubble escalated, the collapse of which devastatedthe economy and households. The CBO leadership suppressed and minimized concerns aboutthese issues, viewing these concerns in October 2010 as media “sensationalism” and “hype.”Such statements if made public would raise serious questions about the credibility andobjectivity of the CBO, and the kinds of analyses that would be provided to Congress andallowed to be made known to the public. This “hype” has entered the nation’s courtrooms:

o On January 7,2011, the Supreme Court of Massachusetts agreed with a lower courtdecision that invalidated the foreclosures actions of two of the largest banks onmortgages that were in MBSs; the legal right to foreclose was not proven.

o Courts in Florida have also followed suit.

On February 14,2011, U.S. Bankruptcy Judge Robert E. Grossman in Central Islip,New York rendered the MERS system invalid. ln rendering his decision, JudgeGrossman acknowledged that his decision would have “significant impact.”

o On February 16,2011, MERS released a statement, an exce{pt which reads:“The proposed amendment will require Members to not foreclose in MERS’name…During this period we request that Members do not commence foreclosures inMERS’name.”

The implications have profound financial and economic consequences that would be ofcompelling interest to Congress and the public, but the CBO sought to silence a discussion ofsuch risks, that in reality, have been mateiralizing. These risks put into question the ability ofinvestors or bondholders to make claims on the collateral (the homes) that underlies trillions ofdollars in MBSs, the bulk of which are now guaranteed by the govemment-sponsored enterprises(“GSEs” Fannie Mae and Freddie Mac). This affects $10 trillion in residential mortgage debtoutstanding, of which $7 trillion in mortgage-backed securities (MBSs) are backed by about 65million homes, and roughly $3 trillion is in the form of mortgage loans on bank balance sheets.

The $7 Trillion MBS Problem -Foreclosure Problems and Buy Backs

Banks, Private Label MBSs. About $1.5 trillion MBSs are bank-issued, private labelMBSs that were collateralized by primarily subprime mortgages, $330 billion of which isdelinquent. Banks have publicly acknowledged these risks by recently increasing reservesagainst repurchase of bad mortgages from investors and litigation costs. As of third quarter 2010,the nation’s largest four banks – Bank of America, JP Morgan Chase, Citigroup, and Wells Fargo– have reserved about $10 billion for potential mortgage buy back demands,l a “miniscule”amount given the $330 billion in delinquent mortgages. The combined net worth of the largestfour banks is about $700 billion.

The foreclosure problems may put even greater pressure on banks as some state courtsand legislation have made dents into the legal foundation of MERS. The implication is thatinvestors may be holding trillions in MBSs that are unsecured, which places even gteaterpressure on banks for mortgage buy-backs. Banks may also face greater losses in not having thelegal authority under MERS to foreclose and liquidate the collateral. These issues (among others)are concentrated among a handful of the largest banks that hold about three quarters of thenation’s banking assets, a concentration that has been deemed a systemic risk to the nation’seconomic and financial system. The CBO dismissing such issues prevents an analysis of therisks, so that the public may be forced again to shoulder the consequences for which they havenot been a given a voice or a choice.

GSEs, Agency MBSs. The other $5.5 trillion MBSs are issued or guaranteed by FannieMae and Freddie Mac, whose fate is currently being debated by policy makers. During the firstnine months of 2010, Fannie Mae repurchased about $195 billion in delinquent loans from itsMBSs;2 Freddie Mac faced $5.6 billion in buy back demands.3 The amount of these repurchasesin less than one year alone would wipe out Bank of America, the largest bank in the country.

The GSEs hold $266 billion in bank-issued private label MBSs, which have experienced thehighest rates of default. Recently, Bank of America paid $2.8 billion to the GSEs to settle $7billion in mortgage buy-back requests, a private transfer of loss to the public that remainsunbeknownst to the public.

A discussion of these and other issues were not acceptable to the CBO leadership, butunrealistic assumptions are encouraged and significant facts inconsistent with theirpredetermined views are overlooked in providing economic analyses and estimates to Congress.For instance, the CBO leadership appeared panic-stricken when I suggested that interest rateswere likely to rise in early November 2010 despite the Federal Reserye’s quantitative easingprograms, and what that may mean for example, to an already weakened housing market. Indeed,interest rates have risen sharply since then from 4.3Yoto 5.}Yo onthe 30 year fixed-rate mortgage“FRM” (as of 2117111). Providing a correct assessment did not seem to matter.

For presenting a truthful and correct assessment of where things stood, I was fired. Iknow other economists who have been pressured to fall in line with the leadership, but are afraidto voice their concerns for fear that it could endanger their careers. I am prepared to identifythem, but only with your assurance that their identities will be remain confidential at this time.

I deeply appreciate your taking the time to consider the information I have placed beforeyou.